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  3. FHA Loan Calculator

fha loan calculator

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How to use Credit Karma’s FHA loan calculator

FHA loans are mortgages insured by the Federal Housing Administration, which allows participating lenders to offer home loans with low down payments to people who may have lower credit scores. They are an especially popular choice for first-time homebuyers.

With our FHA loan calculator, you can estimate what your monthly payment could look like with an FHA loan. The calculator’s results are based on a number of factors, including the cost of the home, the down payment you can make and other common costs and fees. Keep in mind that your actual costs may be higher depending on the lender you choose.

The following inputs go into the Credit Karma FHA loan calculator. The more information you can put in, the more accurate the estimate could be.

Cost of the home

Start with the sales price of the home you’re looking at. If you’re still in the shopping phase, you can put in a few estimates of the price range you’re considering.

Down payment

Your down payment is the cash you can pay upfront to buy your home, apart from closing costs. You can input either a dollar amount or a percentage of the purchase price for your down payment in this calculator. FHA loan rules require a down payment of at least 3.5% if your credit score is 580 or above (with additional lender requirements or “overlays” possible). If your score falls between 500 and 579, you’ll need to put down at least 10%.

Loan amount

Your loan amount is generally the difference between the purchase price and your down payment. FHA loans have set maximum loan amounts depending on the area in which you’re buying a home. You can search for the maximum loan amount available where you live.

Estimated interest rate

Your interest rate represents the money you pay to the lender in exchange for allowing you to take out the mortgage. Different lenders may offer different interest rates, so be sure to shop around to find the best rate you can qualify for. Credit Karma can help you compare current mortgage rates. Interest rates are based on a variety of factors, including your credit scores, down payment amount and length of the loan. Higher credit scores typically mean better interest rates, and shorter loan terms usually have lower interest rates as well.

Life of the loan

Your FHA loan will have a set term in years, representing the time it will take you to pay off the mortgage. The maximum loan term for an FHA loan is 30 years, though you can choose a shorter loan term. A 15-year mortgage is another common loan term. Shorter terms usually mean lower interest rates, but your monthly payment tends to be higher because you’re paying off the loan more quickly.

Property taxes

Local and state governments charge property taxes, typically basing the amount you pay on the value of your property. Property tax rates vary across the country. You can find out your property tax rate through your county or state tax assessor’s office. The FHA requires that all such real estate taxes be paid through an escrow account.

Homeowners insurance

Lenders generally require their borrowers to show proof of homeowners insurance. This insurance helps cover the cost to repair damage in the event of a fire, burglary or other unexpected event. This will also be part of your escrow account.

HOA fees

If you’re buying a home in a subdivision or condo community, you’ll generally pay regular homeowners association dues.

How much FHA mortgage payment can I afford?

FHA loans require your monthly mortgage payment to be generally no more than 31% of your gross monthly income, or the total you earn before taxes. If your family earns $75,000 per year, that means your monthly FHA loan payment should be no more than $1,937.50.

The FHA also requires lenders to consider other debt you hold, like car loans or student loans. Your debt-to-income ratio, or your monthly debt payments compared with your total income, can be as high as 43%, but if “compensating factors” are present, that limit could be higher, depending on the lender. Compensating factors can include large cash reserves, an increase in the mortgage payment, or having residual income.

You can use our calculator to determine if the home you’re looking for could have a monthly payment that falls within those limits. But just because you qualify for a particular loan amount doesn’t mean it’s a good idea to borrow that much. You must decide on a payment that fits comfortably in your budget, taking into account costs like monthly utilities bills and  maintenance or repairs.

What is an FHA loan amortization schedule?

An FHA loan amortization schedule shows how your regular monthly payments pay down the mortgage over the life of the loan. The percentage of your payment that goes toward principal versus interest changes over time. At the start of the loan, most of your monthly payment will go toward interest. Over time, more of your monthly payment goes toward the principal of the loan.

Some homeowners choose to make additional payments to help build equity more quickly. Extra payments you make can go straight to the principal of the loan, but make sure to check with your lender before sending in more than your regular payment.

Credit Karma’s loan amortization calculator can help show you how your monthly FHA loan payment could work.

How can I prepare to buy a home with an FHA loan?

Credit Karma’s FHA loan calculator can help you estimate your payments on an FHA loan, but you may also want to consider other types of mortgages. You should also consider taking a few of the following steps:

  • Check your credit. Under FHA loan rules, with a credit score at or above 580, you may  be able to make a down payment as low as 3.5%. Additional lender standards may apply.
  • Determine your down payment. While the FHA loan program has set minimum down payment requirements, you can choose to put more money down on the home if you can afford it. Take a look at the money you’ve saved up, but be sure to subtract what you’ll need for moving costs, renovations and other expenses. You should leave a financial cushion for emergencies, too.
  • Gather your documents. When you apply for an FHA loan, mortgage companies will need you to submit a range of home loan documents to see if you qualify for a mortgage and will be able to repay the loan. If you start putting together documents like W-2 tax forms, bank account statements, pay stubs and tax returns, it will make applying for an FHA loan much smoother.